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With few exceptions, all public corporations in the United States are now required to have a majority of independent directors. The logic of this requirement is that independent directors will do a better job of monitoring management than would insiders and others who are dependent on the goodwill of the CEO and top management. This chapter argues that independence has become a fetish—i.e., an idea eliciting unquestioning reverence, respect, and devotion. Director independence is not a panacea for the ills of corporate governance and, at least in some settings, is undesirable.

With few exceptions, all public corporations in the United States are now required to have a majority of independent directors. The logic of this requirement is that independent directors will do a better job of monitoring management than would insiders and others who are dependent on the goodwill of the CEO and top management. This chapter argues that independence has become a fetish—i.e., an idea eliciting unquestioning reverence, respect, and devotion. Director independence is not a panacea for the ills of corporate governance and, at least in some settings, is undesirable.